John Coffee on Corporate Crime Boeing and Throwing Employees Under the Bus

Earlier this year, a jury in Dallas, Texas found Mark Forkner not guilty.

Forkner was the Boeing test pilot who was the only individual accused of criminal activity for Boeing’s crime that resulted in 354 individuals dying in two Boeing 737 MAX crashes.

Forkner’s lawyer portrayed Forkner as a scapegoat for the Boeing criminal activity that involved higher ups in the company.

The jury apparently agreed.

John Coffee is a Professor of Law at Columbia Law School. He’s the author of Corporate Crime and Punishment: The Crisis of Underenforcement. And he says that Boeing threw Forkner under the bus.

“No high ranking officer was at all implicated,” Coffee told Corporate Crime Reporter in an interview last week. “Boeing threw a junior employee under the bus and gave him to the government as the person personally responsible. Without defending Mark Forkner, his conduct was at a fairly low level. He may have been culpable, but he has a low role.”

The last time we interviewed you, you said that the Boeing deferred prosecution agreement was one of the worst that you had seen.

“Definitely. I would put it at the very bottom of outrageous deferred prosecution agreements,” Coffee said. “This was a case of egregious forum shopping. Understand this about Boeing. It historically grew up in Seattle. It is incorporated in Delaware. Its headquarters are in Chicago. It has no connection at all with Dallas, Texas. But the government brought the criminal prosecution against Boeing down in Dallas. Why? They got a very Republican conservative U.S. Attorney. And they got a judge they particularly wanted. I’m not saying anything against Judge Reed O’Connor in an ad hominem sense. I’m just pointing out his position.”

“There are a number of articles in the New York Times and in the Texas newspapers pointing out that the Texas Attorney General, when he wishes to challenge federal legislation, brings the case before Judge Reed O’Connor in Dallas, Texas. And Judge O’Connor has ruled federal legislation unconstitutional on very conservative theories. For example, he was the judge who struck down all of Obamacare. Eventually the Supreme Court didn’t uphold him, but he did strike it down on a nationwide basis. And he’s done that in other cases as well.”

“He’s known as being a fairly ideological judge favoring very conservative approaches to the Constitution. And he’s hostile to the federal government in a number of respects.” 

“Having brought the case in Dallas, you also have a conservative U.S. Attorney and you are able to control the negotiations and the plea bargaining so that it wouldn’t get out of control and require more than either defendant or the White House wanted to give. Donald Trump was always sympathetic to Boeing and wanted to get it back online and have its planes flying again.”

“So, you had this favorable and unusual forum that has no natural connection to the case.”

Over the 36 years we have been doing Corporate Crime Reporter, I ask prosecutors and defense attorneys whether politics plays any role in bringing corporate criminal prosecutions. I can’t remember anybody saying yes – politics plays a role.

“The Department of Justice would play a role, not the individual Assistant U.S. Attorney.”

Why would the Justice Department want to play ball with the defendant in this case?

“The key defense counsel for Boeing had been the Deputy United States Attorney General. He was very high in the prior administration. He knew everything about assigning cases to different federal districts. He wanted to get this to the most favorable conservative district he could find. It was brought in Dallas, Texas against all of the tradition of bringing the case where the fundamental conduct occurred – that would have been in Seattle or Chicago.” 

“But he wants it in Dallas. He has a lot of influence with the Justice Department. And it may be that the Justice Department so advised the Assistant U.S. Attorneys that they wanted quick cooperation.” 

“We do know that they brought it in Dallas, Texas and a deal was quickly and quietly reached. I thought it was a very weak deal.”

What about the penalties?

“The penalties were advertised as being $2.5 billion. That made it sound like that was a tough settlement. But that is quite misleading. The penalties here are quite inflated. The real penalties are much smaller.” 

“Of this $2.5 billion, less than ten percent was a criminal fine. The criminal fine was $243 million. What was the big item? It was $1.77 billion – roughly 70 percent of the total penalty. That was a payment that was to be made, or had been made already, by Boeing to its major airline customers. Boeing marketed this plane to the big four of the airline industry. Those customers had contract rights. They had rights to sue Boeing because the plane was removed from the air by the FAA because it was dangerous. That breached the contract and Boeing would have to pay those losses in any event. Those losses were added to this settlement to inflate its value.” 

“If you read the settlement closely, they said that this includes all payments already made. For all we know, these payments could have been already made based on normal commercial negotiations between Boeing and its customers.” 

“Another $500 million went to the victims. There were something like 343 victims. It would have been paid in one form or another. This was an attempt to get a downpayment on the tort settlements in civil cases.”

“The only money paid to the U.S. government as a criminal penalty is the $243 million – less than ten percent of the total settlement amount. And all of the other payments other than the criminal fine will be tax deductible in the normal case. Criminal fines are not tax deductible, but criminal fines here are less than ten percent. The remaining amounts paid, if Boeing is able to use the tax losses, which they could eventually do because they can be carried forward, then they will be reduced by fifty percent or so.”

“The settlement is also filled with cosmetics. Boeing sets up on its board an airline safety committee. That’s not a bad thing to do. Maybe they should have done it long ago. Or maybe it should be part of what the audit committee does. But setting up a committee is the easiest thing for a corporate lawyer to propose when they want to talk about a meaningful reform. But I don’t think it counts for very much.”

“And we don’t have full disclosure. We don’t know how much had already been paid by Boeing to the airline customers. We don’t know what the negotiations had already been with respect to the litigation that had been brought against Boeing. My point is there was only a small criminal fine and a lot of inflated fat that has been added on in order to make the settlement look more substantial than it actually is and thus more acceptable.”

“And finally, no high ranking officer was at all implicated. Boeing threw a junior employee under the bus and gave him to the government as the person personally responsible. Without defending Mark Forkner, his conduct was at a fairly low level. He may have been culpable, but he has a low role.” “Boeing had a strong motive. Boeing was in intense competition with Airbus. Boeing knew that if they had to give even special simulator training to pilots, it would make the plane much more expensive. Boeing is quoted as having said – the cost of additional training for the pilots flying the MAX would amount to $1 million per plane. One million dollars per plane would change the competitiveness of the 737 MAX.” 

“There is evidence showing that Forkner was under great pressure. Corporate pressure on the employee is one reason the employee may misbehave.” 

“I don’t say that Forkner was innocent, but he was not causal. And I believe the reason the jury acquitted him after a very short trial was they also saw him as a scapegoat. His attorney presented him as a scapegoat. And that’s a question for the jury. And I think the jury decided that he did not play a significant role and was being blamed for conduct that was really for higher ups.”

You implicated the Boeing criminal defense team for putting the criminal case in Dallas.

“Defense lawyers are supposed to be zealous in the representation of their client. And they were extremely zealous in getting this put in a conservative district that had no relationship to Boeing’s normal activities. They point out, to justify Dallas, that occasionally, Boeing’s planes landed in Dallas. Boeing planes land everywhere. You could say they land in Afghanistan. But this is not normal practice. This is a major deviation from normal practice. I can’t say it’s unethical. Attorneys on both sides are supposed to be zealous in representing their clients. And they were here.”

But does Boeing have such power over the Justice Department? Do they also have such power when it comes to charging decisions, choosing to charge only a scapegoat and not someone higher up and more responsible?

“That of course is a decision of the Department of Justice. The judge plays no role in that. They probably recognized that to make the deferred prosecution agreement less sensational, less objectionable, less likely to draw adverse press criticism, they had to give someone up to be identified as a wrongdoer. And they threw a fairly low ranking employee under the bus.”

The Seattle Times reported on the Forkner verdict and ended its story with this: “Forkner’s acquittal seems to mark the end of legal risk for Boeing and its employees.” 

But there are ongoing civil cases. And there are two cases seeking punitive damages. What about punitive damages when the criminal justice system fails, as it has here?

“The Supreme Court has greatly curtailed the ability of judges to award punitive damages. And they have said that punitive damages had to be a low single digit ratio to the actual compensatory damages.” 

“Subsequently, there is less of a deterrent threat with punitive damages. There have been many studies on punitive damages. They are hard to get. Juries are typically more conservative than you would expect. They may pay punitive damages. But that would have been true even if this had been a much stronger criminal settlement. Had Boeing paid $8 billion, instead of $243 million in a criminal fine, there would still be lawsuits brought by all of the victims.”

What impact does it have on the country when the citizenry witnesses this miscarriage of justice in a case involving one of the most powerful corporations?

“They were hoping to hide this from citizens. It has begun to come out. The fact that a jury held an employee not to be responsible doesn’t mean there was no one responsible. It means that someone else was responsible and they have been hidden by the negotiation of this deferred prosecution agreement.”

“I think the whole deferred prosecution agreement process has to be severely reworked. Companies should only get such credit when they self-report. And Boeing did not self-report at all. It was quite different from the case we talked about earlier. Boeing’s deferred prosecution agreement expressly states that Boeing did not do anything to cooperate after even the first crash. You know after the first crash that this is a problem. And you are still saying nothing is wrong, the plane is just fine? And then you get the second crash and the whole world shuts Boeing down.”

In your book Corporate Crime and Punishment, you call for the phase out of deferred and non prosecution agreements.

“Non prosecution agreements are different. They are even worse. There is no document publicly filed. The Department of Justice and the corporation settle without there being a court having any oversight at all.”

The Biden administration is going to phase out deferred and non prosecution agreements?

“There is a slight chance. A number of law professors, including myself, met with the Deputy Attorney General. That was a theme several of us raised. The first significant reform would be to end non prosecution agreements. With deferred prosecution agreements, there should be significant changes.” 

“In the Boeing case, there was no independent investigation. In many of the better deferred prosecution agreements, a law firm conducts an independent study and writes a 300 page report and charges an arm and a leg for it. It’s very profitable. But you get a fairly objective view of what happened. You don’t really have that in Boeing.” 

[For the complete q/a format Interview with John Coffee, see 36 Corporate Crime Reporter 15(11), Monday April 11, 2022, print edition only.]

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